An IRA rollover is a popular way to save for retirement while preserving the tax-deferred status of those assets. When you move funds from one retirement account to another, this is considered a rollover. The two primary methods of rollovers are direct and indirect, and it is important to understand the IRS regulations related to these transfers in order to avoid taxes and penalties.

A direct rollover is the easiest and safest form of an IRA rollover. This form of rollover involves a direct transfer, meaning that the funds never need to touch your hands. Rather, the funds will be moved from one retirement account to the other without the need for you to personally receive the funds in between. While this is the safest way to conduct a rollover, some plans may not allow a direct rollover.

If a direct rollover is not an option, an indirect rollover may be another way to move funds from one retirement account to another. An indirect rollover is when you personally receive the funds in between the two accounts, before rolling them over into a new IRA. This requires you to be more careful and precise while handling your funds, as the IRS mandates the funds be rolled into the new IRA no later than 60 days after the distribution. If they are not, they will be subject to taxes and potentially other penalties.

A key to a successful IRA rollover is to have a complete understanding of the rules and regulations set by the IRS to ensure that you do not pay taxes or incur penalties. Whether you choose a direct or indirect rollover, both options give you the ability to move funds from retirement account to another and maintain their tax-deferred status. Make sure you understand the potential risks and consequences of making mistakes when transferring your funds, and always check with a financial advisor to ensure you are making the best decision for your retirement plan.